How ASIC’s new industry funding model will work

Australian notes and coins sitting on desk with calculator

Are you ready for the Australian Securities and Investment Commission’s new industry funding model? Here’s how it will work:

Under the new arrangements which took effect on 1 July 2017, regulated entities will pay the costs of ASIC’s regulatory services. The aim is to allow ASIC to better focus its resources on the sectors that are creating the need for most regulation.

The new model will recover the actual amount ASIC spent on regulating entities during the previous financial year. As a result, levies can only be calculated and issued in the following financial year.

Regulated entities have been categorised into 48 subsectors. ASIC's regulatory costs will be allocated across these subsectors, either through either a flat levy or a graduated levy.

The flat levy is aimed at minimising the reporting burden and at making it easier for entities in many subsectors to estimate their levy amount. It will share the total cost of regulating a subsector equally among the entities operating in that subsector.

In other subsectors, an entity’s size or level of business activity will drive the level of risk and regulatory effort required from ASIC and therefore the levy charged. A graduated levy will be calculated by dividing ASIC’s regulatory costs for a subsector between entities based on the relevant metrics.

The detailed methodology of how ASIC will calculate levies for each industry sector is outlined in Report 535 ASIC cost recovery arrangements: 2017–18.

Regulated entities will need to submit information to ASIC each year.

Between July and September each year, they will need to provide ASIC with their business activity metrics for the previous financial year. The first collection of these will occur in July to September 2018. This will be done this via ASIC’s new Regulatory Portal which is currently in development.

The information provided by those required to pay a flat levy only will confirm which subsector they have been operating in.

For those paying a graduated levy, the information they provide will confirm their entity's 'share' of the leviable activities in their subsector and will determine their final invoice amount.

Forecast costs for ASIC’s regulatory work will be published in its annual Cost Recovery Implementation Statement (CRIS) each October.

Where possible, ASIC says it will publish the indicative levies in advance for each subsector. For the 2017-18 financial year, this will only be possible where ASIC can access the business activity metrics that are used to allocate costs for that subsector. At this stage, ASIC expects this information to be available for around 80 per cent of leviable entities in the regulated population.

Each year in January, regulated entities will receive an invoice from ASIC via the Regulatory Portal. The first invoices will be issued in January 2019.

ASIC’s regulatory costs for small proprietary companies will be collected through a $5 increase to their annual review fee, which will take effect from 1 July 2018. This simple fee increase minimises the reporting burden on small proprietary companies.

‘Industry funding provides industry with a strong incentive to self-regulate because if the wrong thing is done, we will intervene, and increase the costs charged to that sector,’ says ASIC.

‘It also strengthens ASIC's accountability to, and relationship with, industry because the cost of what we do will be more transparent.’

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